Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2017 | Apr. 30, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | DLH Holdings Corp. | |
Entity Central Index Key | 785,557 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 11,251,614 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||||
Revenue | $ 29,905 | $ 16,934 | $ 56,016 | $ 33,493 |
Direct expenses | 23,504 | 13,710 | 43,804 | 27,352 |
Gross margin | 6,401 | 3,224 | 12,212 | 6,141 |
General and administrative expenses | 4,008 | 2,513 | 8,729 | 5,028 |
Depreciation and amortization | 554 | 22 | 755 | 42 |
Income from operations | 1,839 | 689 | 2,728 | 1,071 |
Other income (expense), net | (255) | (127) | (619) | (702) |
Income before income taxes | 1,584 | 562 | 2,109 | 369 |
Income tax expense (benefit), net | 605 | 225 | 806 | 148 |
Net income | $ 979 | $ 337 | $ 1,303 | $ 221 |
Net income per share, basic (in dollars per share) | $ 0.09 | $ 0.04 | $ 0.12 | $ 0.02 |
Net income (loss) per share - diluted (in dollars per share) | $ 0.08 | $ 0.03 | $ 0.10 | $ 0.02 |
Weighted average common shares outstanding | ||||
Basic (in shares) | 11,249 | 9,717 | 11,225 | 9,642 |
Diluted (in shares) | 12,745 | 10,666 | 12,713 | 10,540 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 |
Current assets: | ||||
Cash and cash equivalents | $ 3,091 | $ 3,427 | $ 5,558 | |
Accounts receivable, net | 8,871 | 6,637 | ||
Other current assets | 757 | 542 | ||
Total current assets | 12,719 | 10,606 | ||
Equipment and improvements, net | 1,120 | 644 | ||
Deferred taxes, net | 10,773 | 11,415 | ||
Goodwill and other intangible assets, net | 41,997 | 42,304 | ||
Other long-term assets | 105 | 105 | ||
Total assets | 66,714 | 65,074 | ||
CURRENT LIABILITIES | ||||
Loans Payable, Current | 3,580 | 3,560 | ||
Derivative Liability, Current | 256 | 204 | ||
Accrued payroll | 3,428 | 3,616 | ||
Accounts payable, accrued expenses, and other current liabilities | 8,711 | 7,136 | ||
Total current liabilities | 15,975 | 14,516 | ||
LONG TERM LIABILITIES | ||||
Long-term Debt | 17,096 | |||
Other long term liability | 18,782 | |||
Total liabilities | 33,071 | 33,298 | ||
Commitments and contingencies | ||||
SHAREHOLDERS’ EQUITY | ||||
Preferred stock, $.10 par value; authorized 5,000 shares, none issued and outstanding | 0 | 0 | ||
Common stock, $.001 par value; authorized 40,000 shares; issued and outstanding 11,252 at March 31, 2017 and 11,148 at September 30, 2016 | 11 | 11 | ||
Additional paid-in capital | 82,460 | 81,897 | ||
Accumulated deficit | (48,828) | (50,132) | ||
Total shareholders’ equity | 33,643 | 31,776 | ||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 66,714 | $ 65,074 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2017 | Sep. 30, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.1 | $ 0.1 |
Preferred stock, authorized shares | 5,000 | 5,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 40,000 | 40,000 |
Common stock, issued shares | 11,242 | 11,148 |
Common stock, outstanding shares | 11,242 | 11,148 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net income (loss) | $ 1,303 | $ 221 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation and amortization expense | 755 | 42 |
Amortization of debt financing costs | 127 | 0 |
Stock based compensation expense | 549 | 342 |
Change in fair value of derivative financial instruments | (52) | 0 |
Deferred taxes, net | 642 | 39 |
Changes in operating assets and liabilities | ||
Accounts receivable | (2,234) | (68) |
Other current assets | (215) | (55) |
Accounts payable, accrued payroll, accrued expenses and other current liabilities | 1,386 | 784 |
Other long term assets/liabilities | 124 | 153 |
Net cash provided by operating activities | 2,489 | 1,458 |
Investing activities | ||
Acquisition of Danya, net of cash acquired | (250) | 0 |
Purchase of equipment and improvements | (674) | (35) |
Net cash used in investing activities | (924) | (35) |
Financing activities | ||
Net repayments on senior debt | (1,875) | 0 |
Repayments of capital lease obligations | (40) | (47) |
Net proceeds from issuance of stock | 14 | 0 |
Net cash used in financing activities | (1,901) | (47) |
Net change in cash and cash equivalents | (336) | 1,376 |
Cash and cash equivalents at beginning of period | 3,427 | 5,558 |
Cash and cash equivalents at end of period | 3,091 | 6,934 |
Supplemental disclosures of cash flow information | ||
Cash paid during the period for interest | 434 | 0 |
Cash paid during the period for income taxes | $ 300 | $ 105 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements include the accounts of DLH and its subsidiaries, all of which are wholly owned. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending September 30, 2017 . For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual report on Form 10-K for the year ended September 30, 2016 filed with the Securities and Exchange Commission on December 9, 2016 . |
Business Overview
Business Overview | 6 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Overview | Business Overview DLH is a full-service provider of professional healthcare and social services to government agencies including the Department of Veteran Affairs ("VA"), Department of Health and Human Services ("HHS"), Department of Defense ("DoD"), and other government agencies. DLH Holdings Corp. (together with its subsidiaries, "DLH" or the "Company" and also referred to as "we," "us" and "our") manages its operations from its principal executive offices at 3565 Piedmont Road NE, Building 3 Suite 700, Atlanta Georgia 30305. We employ over 1,400 skilled employees working in more than 30 locations throughout the United States. On May 3, 2016, DLH acquired Danya International, LLC (“Danya”) which provides technology-enabled program management, consulting, and digital communications solutions to the federal government and other customers. We acquired Danya to expand our ability to provide complementary business services and offerings across government markets. This acquisition is in line with our strategic growth initiatives, and we intend to continue to review and position ourselves for other potential corporate transactions in the future. Presently, the Company derives 100% of its revenue from agencies of the federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors. A major customer is defined as a customer from whom the Company derives at least 10% of its revenues. Our largest customer continues to be the VA, which comprised approximately 58% and 95% of revenue for the six months ended March 31, 2017 and 2016 , respectively. Additionally, HHS represents a major customer, comprising 30% of revenue for the six months ended March 31, 2017 . In addition, substantially all accounts receivable, including unbilled accounts receivable, are from agencies of the U.S. Government as of March 31, 2017 and September 30, 2016. We believe that the credit risk associated with our receivables is limited due to the creditworthiness of these customers. See Note 4, Supporting Financial Information-Accounts Receivable. As of March 31, 2017 , awards from VA and HHS have anticipated periods of performance of up to three years. These agreements are subject to the Federal Acquisition Regulations. While there can be no assurance as to the actual amount of services that the Company will ultimately provide to VA and HHS under its current contracts, we believe that our strong working relationships and our effective service delivery support ongoing performance for the contract term. The Company's results of operations, cash flows and financial condition would be materially adversely affected in the event that we were unable to continue our relationship with VA or HHS. |
New Accounting Pronouncements
New Accounting Pronouncements | 6 Months Ended |
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance expands related disclosure requirements. The FASB has continued to issue periodic updates to this guidance, to further define the application of the changes. Public business entities should apply the guidance to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of this guidance. In June 2014, the FASB issued guidance related to accounting for share-based payments for certain performance stock awards. In March 2016, the FASB issued updated guidance intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The amendments in this update affect all entities that issue share-based payment awards to their employees. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has adopted this guidance and concluded that it will not significantly affect the Company. In September 2015, the FASB issued guidance regarding business combinations for which the accounting is incomplete by the end of the reporting period in which the combination occurs, and during the measurement period have an adjustment to provisional amounts recognized. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments in this update eliminate the requirement to retrospectively account for those adjustments. The amendments in this update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update, with earlier application permitted for financial statements that have not been issued. Refer to Note 4 for the impact of the adoption of this guidance. In February 2016, the FASB issued guidance intended to improve financial reporting for leasing transactions with a lease term of more than 12 months. The new guidance will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The recognition, measurement, and presentation of expenses and cash flow arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP - which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. The Company is evaluating the impact of this guidance. |
Supporting Financial Informatio
Supporting Financial Information | 6 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supporting Financial Information | Supporting Financial Information Accounts receivable (in thousands) March 31, September 30, Ref 2017 2016 Billed receivables $ 7,459 $ 5,265 Unbilled receivables 1,412 1,372 Total accounts receivable 8,871 6,637 Less: Allowance for doubtful accounts (a) — — Accounts receivable, net $ 8,871 $ 6,637 Ref (a): Accounts receivable are non-interest bearing, unsecured and carried at fair value, which is net of an allowance for doubtful accounts. We evaluate our receivables on a quarterly basis and determine whether an allowance is appropriate based on specific collection issues. Our allowance for doubtful accounts was zero at both March 31, 2017 and September 30, 2016 . Other current assets (in thousands) March 31, September 30, Ref 2017 2016 Prepaid insurance and benefits $ 332 $ 168 Total other prepaid expenses 425 374 Other current assets $ 757 $ 542 Equipment and improvements, net (in thousands) March 31, September 30, Ref 2017 2016 Furniture and equipment $ 670 $ 638 Computer equipment 330 202 Computer software (a) 800 309 Leasehold improvements 38 38 Total fixed assets 1,838 1,187 Less accumulated depreciation and amortization (718 ) (543 ) Equipment and improvements, net (b) $ 1,120 $ 644 Ref (a): The Company is in the process of configuring a new Enterprise Resource Planning system. Capitalized costs include software licenses and implementation labor related to application development. Since the asset has not been placed in service, no depreciation related to the asset has been recognized. Prior to the asset being placed in service a useful life will be determined. Ref (b): Equipment and improvements are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives ( 3 to 7 ) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are expensed as incurred. Goodwill and Intangibles (in thousands) Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Gross Balance at September 30, 2016 $ 34,745 $ 7,247 $ 1,370 $ — $ 43,362 Measurement period adjustment (b) (8,756 ) 9,379 (890 ) 517 250 Adjusted Gross Balance at March 31, 2017 $ 25,989 $ 16,626 $ 480 $ 517 $ 43,612 (in thousands) Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Accumulated amortization at September 30, 2016 $ — $ (993 ) $ (65 ) $ — $ (1,058 ) Prior period amortization adjustment (b) — 300 45 (21 ) 324 Current period amortization — (830 ) (24 ) (27 ) (881 ) Total amortization — (1,523 ) (44 ) (48 ) (1,615 ) Net balance at March 31, 2017 (c) $ 25,989 $ 15,103 $ 436 $ 469 $ 41,997 Ref (a): Intangible assets subject to amortization. Ref (b): See Note 11 for discussion on measurement and amortization period adjustments Ref (c): Estimated amortization expense for future years: (in thousands) Year 1 $ 1,762 Year 2 1,762 Year 3 1,762 Year 4 1,762 Year 5 1,762 Thereafter 7,198 $ 16,008 Ref (a): Intangibles acquired during the acquisition of Danya included customer relationships, a covenant not to compete, and a trade name. The intangibles are amortized on a straight-line basis over the estimated useful lives ( 10 years ). Net amount of amortization expense for the quarter ended March 31, 2017 was $.4 million . The amortization for the six months ended March 31, 2017 was $.6 million . Accounts payable, accrued expenses and other current liabilities (in thousands) March 31, September 30, Ref 2017 2016 Accounts payable $ 5,714 $ 4,324 Accrued benefits 1,194 1,197 Accrued bonus and incentive compensation 173 508 Accrued workers compensation insurance 1,035 981 Other accrued expenses 595 126 Accounts payable, accrued expenses, and other current liabilities $ 8,711 $ 7,136 Debt obligations (in thousands) March 31, September 30, Ref 2017 2016 Gross bank debt obligations (a) 21,563 23,438 Less unamortized debt issuance costs (1,095 ) (1,222 ) Net bank debt obligation 20,468 22,216 Less current portion of bank debt obligations (3,580 ) (3,560 ) Long term portion of bank debt obligation $ 16,888 $ 18,656 Ref (a): Maturity of the bank debt is as follows: Year 1 $ 3,750 Year 2 3,750 Year 3 3,750 Year 4 3,750 Year 5 6,563 Total net bank debt obligation $ 21,563 Other Income (Expense) (in thousands) (in thousands) Three Months Ended Six Months Ended March 31, March 31, Ref 2017 2016 2017 2016 Interest (expense), net (a) $ (215 ) $ — $ (440 ) $ — Amortization of deferred financing costs (b) (67 ) — (127 ) — Change in fair value of derivative financial instruments 27 — (52 ) Other income (expense), net (127 ) — (702 ) Other income (expense), net $ (255 ) $ (127 ) $ (619 ) $ (702 ) Ref (a): Interest expense on borrowing related to acquisition of Danya Ref (b): Amortizations of expenses related to securing financing to acquire Danya |
Credit Facilities
Credit Facilities | 6 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Credit Facilities A summary of our loan facilities and subordinated debt financing as of March 31, 2017 is as follows: ($ in Millions) As of March 31, 2017 Lender Arrangement Loan Balance Interest Maturity Date Fifth Third Bank Secured term loan $25 million ceiling (a) $ 21.6 LIBOR* + 3.0% 05/01/21 Fifth Third Bank Secured revolving line of credit $10 million ceiling (b) $ — LIBOR* + 3.0% 05/01/18 * LIBOR rate as of March 31, 2017 was 1.15% (a) Represents the principal amounts payable on our Term Loan with Fifth Third Bank that partially funded our acquisition of Danya on May 3, 2016. The $25.0 million term loan from Fifth Third Bank was funded at closing and is secured by liens on substantially all of the assets of the Company. The principal of the Term Loan is payable in fifty-nine consecutive monthly installments of $312,500 beginning on June 1, 2016 with the remaining balance due on May 1, 2021. The Term Loan agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. We are in compliance with all loan covenants and restrictions. Among other matters, we must comply with limitations on: granting liens; incurring other indebtedness; maintenance of assets; investments in other entities and extensions of credit; mergers and consolidations; and changes in nature of business. The loan agreement also requires us to comply with certain financial covenants including: (i) a minimum fixed charge coverage ratio of at least 1.35 to 1.0 commencing with the quarter ending June 30, 2016, and for all subsequent periods, and (ii) a Funded Indebtedness to Adjusted EBITDA ratio not exceeding the ratio of 2.99 to 1.0 at closing and thereafter a ratio ranging from 3.5 to 1.0 for the period through September 30, 2016 to 2.5 to 1.0 for the period ending September 30, 2018. In addition to monthly payments of the outstanding indebtedness, the loan agreement also requires prepayments of a percentage of excess cash flow, as defined in the loan agreement. Accordingly, a portion of our cash flow from operations will be dedicated to the repayment of our indebtedness. (b) The secured revolving line of credit from Fifth Third Bank has a ceiling of up to $10.0 million , of which $5.0 million was drawn at closing to cover partial financing of the Danya purchase. Borrowing on the line of credit is secured by liens on substantially all of the assets of the Company. At December 31, 2016, DLH had repaid all draws on our revolving line of credit with no remaining balance. The Company's total borrowing availability, based on eligible accounts receivables at March 31, 2017 , was $6.3 million . This capacity was comprised of $0.9 million in a stand-by letter of credit and unused borrowing capacity of $5.4 million . The revolving line of credit is subject to loan covenants as described above in the Term Loan, and DLH is fully compliant with those covenants. Management believes that: (a) cash and cash equivalents of approximately $3.1 million as of March 31, 2017 ; (b) the amount available under its line of credit that was in effect at March 31, 2017 ; and (c) planned operating cash flow should be sufficient to support the Company's operations for twelve months from the date of these financial statements. |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of goodwill and intangible assets, valuation allowances established against accounts receivable and deferred tax assets, measurement of loss development on workers’ compensation claims, and fair value of derivatives. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates. In particular, a material reduction in the fair value of goodwill could have a material adverse effect on the Company’s financial position and results of operations. We account for the effect of a change in accounting estimate during the period in which the change occurs. Revenue Recognition DLH’s revenue is derived from professional and other specialized service offerings to US Government agencies through a variety of contracts, some of which are fixed-price in nature and/or sourced through Federal Supply Schedules administered by the General Services Administration (“GSA”) at fixed unit rates or hourly arrangements. We generally operate as a prime contractor, but have also entered into contracts as a subcontractor. The recognition of revenue from fixed rates is based upon objective criteria that generally do not require significant estimates. DLH recognizes and records revenue on government contracts when it is realized, or realizable, and earned. DLH considers these requirements met when: (a) persuasive evidence of an arrangement exists; (b) the services have been delivered to the customer; (c) the sales price is fixed or determinable and free of contingencies or significant uncertainties; and (d) collectibility is reasonably assured. Business Combinations In accordance with Accounting Standards Codifications 805, "Business Combinations" ("ASC 805") the Company records acquisitions under the purchase method of accounting, under which the acquisition purchase price is allocated to the assets acquired and the liabilities assumed based upon the respective fair values. The Company utilizes some estimates and in some instances, may retain the services of an independent third-party valuation firm to assist in determining the fair values of assets acquired, liabilities, assumed, and contingent considerations granted. Such estimates and valuation require the Company to make significant assumptions. These assumptions may include projections of future events and operating performance. Goodwill and other intangible assets We have used the acquisition method of accounting for the Danya transaction, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date. The fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date. The Company believes the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. The Company finalized the fair values as of December 31, 2016. The finalized valuation allocation is shown in Note 11 Business Combinations. On the basis of the estimated assets acquired, the Company amortized $0.4 million and $0.6 million for the three and six months ended March 31, 2017 , respectively. Year to date amortization was affected by the finalized purchase price adjustment further discussed in Note 11. DLH continues to review its goodwill and other intangible assets for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. At September 30, 2016 , we performed a goodwill impairment evaluation on the year-end carrying value of approximately $35 million . We performed both a qualitative and quantitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted at September 30, 2016 . For the six months ended March 31, 2017 , the Company determined that no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. Long Lived Assets The Company acquired certain long lived intangibles assets as part of the acquisition of Danya. These assets are estimated at a fair value and amortized on a straight-line basis over their assessed useful lives. The assessed useful lives of the assets are 10 years. Income Taxes DLH accounts for income taxes in accordance with the liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheet when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is "more-likely-than-not" that the position will be sustained upon examination. We had no uncertain tax positions at either March 31, 2017 or September 30, 2016 . We report interest and penalties as a component of income tax expense. In the fiscal quarters ended March 31, 2017 and March 31, 2016, we recognized no interest and no penalties related to income taxes. Stock-based Equity Compensation The Company uses the fair value-based method for stock-based equity compensation. Options issued are designated as either an incentive stock or a non-statutory stock option. No option may be granted with a term of more than 10 years from the date of grant. Option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a binomial option pricing model to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to capital stock. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 . Deposits held with financial institutions may exceed the $250,000 limit. Earnings (Loss) per Share Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common stock outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method. |
Stock-based Compensatin, Equity
Stock-based Compensatin, Equity Grants, and Warrants | 6 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation, Equity Grants, and Warrants | Stock-based Compensation, Equity Grants, and Warrants Stock-based compensation expense All grants of equity represented in these financial statements through the period ended March 31, 2016, were made under the 2006 Long Term Incentive Plan. The 2006 plan expired on February 25, 2016, upon shareholders' approval of the 2016 Omnibus Equity Incentive Plan (collectively, the "Plans"). As of March 31, 2017 , there were 0.5 million shares available for grant. Options issued under the Plans were designated as either an incentive stock or a non-statutory stock option. No option was granted with a term of more than 10 years from the date of grant. Exercisability of option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued shares. Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our statement of operations: (in thousands) (in thousands) Three Months Ended Six Months Ended Ref March 31, March 31, 2017 2016 2017 2016 DLH employees $ 56 $ 6 $ 63 $ 14 Non-employee directors (a) 8 4 486 328 Total stock option expense $ 64 $ 10 $ 549 $ 342 Ref (a): Equity grants of restricted stock, in accordance with DLH compensation policy for non-employee directors. The shares granted in the first quarters of fiscal years 2016 and 2015 vested immediately, and stock expense of approximately $456 thousand and $304 thousand , respectively were recognized accordingly. Unrecognized stock-based compensation expense (in thousands) Six Months Ended March 31, Ref 2017 2016 Unrecognized expense for DLH employees (a) $ 404 $ 30 Unrecognized expense for non-employee directors (b) 8 71 Total unrecognized expense $ 412 $ 101 Ref (a): Compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. Ref (b): Unrecognized stock expense related to prior years equity grants of restricted stock to non-employee directors, based on performance criteria, in accordance with DLH compensation policy for non-employee directors. The shares will vest and expense will be recorded upon future satisfaction of specified performance. Stock option activity for the six months ended March 31, 2017 The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock. (in years) Weighted Weighted Average (in thousands) (in thousands) Average Remaining Aggregate Number of Exercise Contractual Intrinsic Ref Shares Price Term Value Options outstanding, September 30, 2016 2,226 $1.43 5.8 $ 7,581 Canceled — Granted (a) 400 $5.94 Exercised (10 ) $3.00 Options outstanding, March 31, 2017 2,616 $3.48 6.6 $ 9,121 Ref (a): Options granted to DLH employees were valued using a Black Scholes calculation, under the following criteria: • average yield rate of 2.46% was used • contractual lives and expected lives were 10 years for all grants • probability of exercise was based on reaching the market price • monthly price volatility factor of 12% was used • no dividend yield was contemplated The resulting fair values ranged from $0.93 to $1.47, depending on the market measure of the stock price Stock options shares outstanding, vested and unvested for the period ended Number of Shares (in thousands) March 31, September 30, Ref 2017 2016 Vested and exercisable 1,949 1,909 Unvested (a) 667 317 Options outstanding 2,616 2,226 Ref (a): Certain awards vest upon satisfaction of certain performance criteria. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three level hierarchy. These levels are: Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. Observable inputs are based on market data obtained from independent sources. In May 2016 we issued warrants to purchase 53,619 shares of common stock. Using a binomial pricing model, we valued the warrants at $256 thousand and $204 thousand as of March 31, 2017 and September 30, 2016, respectively. Assumptions used in valuing the warrants as of March 31, 2017 included: Risk free interest rate 1.68 % Contractual term 5 years Dividend yield — % Expected lives 4.1 years Expected volatility 144 % Fair value per warrant $5.29 The Company recorded a benefit on the revaluation of the warrant liability of $27 thousand for the quarter ended March 31, 2017. For the six months ended March 31, 2017 the company recorded a charge of $52 thousand related to the revaluation of the warranty liability. The benefit is recorded and classified in other income (expense) in the accompanying consolidated statements of operations. The Company has issued warrants to purchase stock as described above. The fair value of the warrants was estimated by management in the absence of a readily ascertainable market value as follows: December 31, 2016 Level 1 Level 2 Level 3 Warrant issued to acquire common stock $ — $ — $ 283 March 31, 2017 Level 1 Level 2 Level 3 Warrant issued to acquire common stock $ 0 $ 0 $ 256 Change in Level 3 liabilities for the year ended March 31, 2017: Beginning Balance Realized/Unrealized Purchases and Ending Balance Change in Realized (gains) losses for liabilities held at September 30, 2016 (Gains) Losses Settlements March 31, 2017 March 31, 2017 Warrant issued to acquire common stock $ 204 $ 52 $ — $ 256 $ 52 The Company has other financial instruments, including accounts receivable, accounts payable, loan payable, notes payable, and accrued expense. Due to the short term nature of these instruments, DLH estimates that the fair value of all financial instruments at March 31, 2017 and September 30, 2016 does not differ materially from the aggregate carrying values of these financial instruments recorded in the accompanying consolidated balance sheets. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings (Loss) Per Share Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method. (in thousands) Three Months Ended Six Months Ended March 31, March 31, 2017 2016 2017 2016 Numerator: Net income $ 979 $ 337 $ 1,303 $ 221 Denominator: Denominator for basic net income (loss) per share - weighted-average outstanding shares 11,249 9,717 11,225 9,642 Effect of dilutive securities: Stock options and restricted stock 1,496 949 1,488 898 Denominator for diluted net income per share - weighted-average outstanding shares 12,745 10,666 12,713 10,540 Net income per share - basic $ 0.09 $ 0.04 $ 0.12 $ 0.02 Net income per share - diluted $ 0.08 $ 0.03 $ 0.10 $ 0.02 |
Commitment and Contingencies
Commitment and Contingencies | 6 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Payments Due By Period Obligations Next 12 2-3 4-5 More than 5 (Amounts in thousands) Ref Total Months Years Years Years Debt Obligations (a) $ 21,563 $ 3,750 $ 7,500 $ 10,313 Facility leases (b) $ 4,122 $ 900 $ 1,819 $ 694 $ 709 Equipment capital leases (c) 24 24 — — — Equipment operating leases (d) 459 102 204 153 — Total Obligations $ 26,168 $ 4,776 $ 9,523 $ 11,160 $ 709 Ref (a): Amounts due under term loan agreement described in Note 5. Ref (b):Represents amounts committed on facility lease agreements as of March 31, 2017 . Ref (c): Represents remaining amounts committed as of March 31, 2017 on a capital lease arrangement. Ref (d): Represents remaining amounts committed as of March 31, 2017 on operating lease arrangements.. Workers Compensation We accrue workers compensation expense based on claims submitted, applying actuarial loss development factors to estimate the costs incurred but not yet recorded. Our accrued liability for claims development as of March 31, 2017 and September 30, 2016 was $1.04 million and 0.98 million , respectively. Legal Proceedings The Company is not aware of any pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations, financial position or cash flows. |
Business Combinations
Business Combinations | 6 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations: Acquisition of Danya International, LLC On May 3, 2016, the Company acquired 100% of the equity interests of Dayna International, LLC for a purchase price of $38.75 million . The acquisition was financed through a combination of: • borrowings of $30.0 million under the Company’s senior credit facility, • cash on hand of approximately $3.75 million , • 670,242 restricted shares of DLH common stock, valued at $2.5 million based on the 20 day volume-weighted average price (VWAP) of DLH stock, or $3.73 per share, and • $2.5 million pursuant to a subordinated loan arrangement with the Company’s largest stockholder. As of March 31, 2017 the Seller beneficially owns approximately 6.0% of the Company’s outstanding shares. The acquisition of Danya International is consistent with the Company’s growth strategy, which calls for the development of new customers and service offerings both organically and through mergers and acquisitions. We used the acquisition method of accounting for this transaction, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date. The total base purchase price for Danya was $38.75 million , with adjustments as necessary based on a finalized working capital calculation compared to the target prescribed in the acquisition agreement as amended. A $0.47 million working capital adjustment to the purchase price was finalized in December 2016, and the final $0.25 million payment made to the seller. As of December 31, 2016 the Company completed it valuation of the transaction and finalized the adjustments to the estimated values recognized at September 30, 2016. Therefore the Company recognized an increase to the fair value of intangibles in the amount of $9.0 million with a corresponding decrease to goodwill. Additionally, the change to the estimated amounts resulted in a decrease in amortization of $.3 million in the quarter ended December 31, 2016. The change was based on the final valuation which calculated the value for each type of intangible asset. See Note 4 for further presentation. We allocated total acquisition consideration and the finalized allocation of fair value to the related assets and liabilities as follows: (Amounts in thousands) Cash $ 36,720 Common stock, fair value 2,500 Total Consideration $ 39,220 (Amounts in thousands) Net assets acquired Cash and cash equivalents $ 4,009 Accounts receivable 5,712 Other current assets 444 Total current assets 10,165 Accounts payable and accrued expenses (5,013 ) Payroll liabilities (1,432 ) Net working capital surplus 3,720 Property and equipment, net 403 Intangible assets: Customer relationships 16,626 Covenant not to compete 480 Trade name 517 Other long term assets 81 Net identifiable assets acquired 18,107 Goodwill 17,393 Net assets acquired $ 39,220 During the six months ended March 31, 2017, Danya contributed approximately $20.5 million of revenue and $1.2 million income from operations. The following table presents certain results for the three and six months ended March 31, 2017 and 2016 as though the acquisition of Danya had occurred on October 1, 2015. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of our results if the acquisition had taken place on that date. The pro forma results presented below include amortization charges for acquired intangible assets and adjustments to interest expense incurred and exclude related acquisition expenses. (in thousands) (in thousands) Three Months Ended Six Months Ended March 31, March 31, Pro forma results 2017 2016 2017 2016 Revenue $ 29,905 $ 28,987 $ 56,016 $ 57,495 Net income $ 979 $ 821 $ 1,303 $ 426 Number of shares outstanding - basic 11,249 11,098 11,225 11,023 Number of shares outstanding - diluted 12,745 12,047 12,713 11,921 Basic earnings per share $ 0.09 $0.07 $0.12 $0.04 Diluted earnings per share $ 0.08 $0.07 $0.10 $0.04 |
Related Party Disclosure
Related Party Disclosure | 6 Months Ended |
Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions. The Company has determined that for the quarter ended March 31, 2017 there were no related party transactions that have occurred which require disclosure through the date that these financial statements were issued. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events. Management has evaluated subsequent events through the date that the Company's financial statements were issued. Based on this evaluation, the Company has determined that no other subsequent events have occurred which require disclosure through the date that these financial statements were issued. |
Significant Accounting Polici19
Significant Accounting Policies (Policies) | 6 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance expands related disclosure requirements. The FASB has continued to issue periodic updates to this guidance, to further define the application of the changes. Public business entities should apply the guidance to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of this guidance. In June 2014, the FASB issued guidance related to accounting for share-based payments for certain performance stock awards. In March 2016, the FASB issued updated guidance intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The amendments in this update affect all entities that issue share-based payment awards to their employees. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has adopted this guidance and concluded that it will not significantly affect the Company. In September 2015, the FASB issued guidance regarding business combinations for which the accounting is incomplete by the end of the reporting period in which the combination occurs, and during the measurement period have an adjustment to provisional amounts recognized. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments in this update eliminate the requirement to retrospectively account for those adjustments. The amendments in this update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update, with earlier application permitted for financial statements that have not been issued. Refer to Note 4 for the impact of the adoption of this guidance. In February 2016, the FASB issued guidance intended to improve financial reporting for leasing transactions with a lease term of more than 12 months. The new guidance will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The recognition, measurement, and presentation of expenses and cash flow arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP - which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. The Company is evaluating the impact of this guidance. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of goodwill and intangible assets, valuation allowances established against accounts receivable and deferred tax assets, measurement of loss development on workers’ compensation claims, and fair value of derivatives. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates. In particular, a material reduction in the fair value of goodwill could have a material adverse effect on the Company’s financial position and results of operations. We account for the effect of a change in accounting estimate during the period in which the change occurs. |
Revenue Recognition | Revenue Recognition DLH’s revenue is derived from professional and other specialized service offerings to US Government agencies through a variety of contracts, some of which are fixed-price in nature and/or sourced through Federal Supply Schedules administered by the General Services Administration (“GSA”) at fixed unit rates or hourly arrangements. We generally operate as a prime contractor, but have also entered into contracts as a subcontractor. The recognition of revenue from fixed rates is based upon objective criteria that generally do not require significant estimates. DLH recognizes and records revenue on government contracts when it is realized, or realizable, and earned. DLH considers these requirements met when: (a) persuasive evidence of an arrangement exists; (b) the services have been delivered to the customer; (c) the sales price is fixed or determinable and free of contingencies or significant uncertainties; and (d) collectibility is reasonably assured. Business Combinations In accordance with Accounting Standards Codifications 805, "Business Combinations" ("ASC 805") the Company records acquisitions under the purchase method of accounting, under which the acquisition purchase price is allocated to the assets acquired and the liabilities assumed based upon the respective fair values. The Company utilizes some estimates and in some instances, may retain the services of an independent third-party valuation firm to assist in determining the fair values of assets acquired, liabilities, assumed, and contingent considerations granted. Such estimates and valuation require the Company to make significant assumptions. These assumptions may include projections of future events and operating performance. |
Goodwill and other intangible assets | Goodwill and other intangible assets We have used the acquisition method of accounting for the Danya transaction, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date. The fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date. The Company believes the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. The Company finalized the fair values as of December 31, 2016. The finalized valuation allocation is shown in Note 11 Business Combinations. On the basis of the estimated assets acquired, the Company amortized $0.4 million and $0.6 million for the three and six months ended March 31, 2017 , respectively. Year to date amortization was affected by the finalized purchase price adjustment further discussed in Note 11. DLH continues to review its goodwill and other intangible assets for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. At September 30, 2016 , we performed a goodwill impairment evaluation on the year-end carrying value of approximately $35 million . We performed both a qualitative and quantitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted at September 30, 2016 . For the six months ended March 31, 2017 , the Company determined that no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. |
Income Taxes | Income Taxes DLH accounts for income taxes in accordance with the liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheet when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is "more-likely-than-not" that the position will be sustained upon examination. We had no uncertain tax positions at either March 31, 2017 or September 30, 2016 . We report interest and penalties as a component of income tax expense. In the fiscal quarters ended March 31, 2017 and March 31, 2016, we recognized no interest and no penalties related to income taxes. |
Long-lived Assets | Long Lived Assets The Company acquired certain long lived intangibles assets as part of the acquisition of Danya. These assets are estimated at a fair value and amortized on a straight-line basis over their assessed useful lives. The assessed useful lives of the assets are 10 years. |
Stock-based Equity Compensation | Stock-based Equity Compensation The Company uses the fair value-based method for stock-based equity compensation. Options issued are designated as either an incentive stock or a non-statutory stock option. No option may be granted with a term of more than 10 years from the date of grant. Option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a binomial option pricing model to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to capital stock. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 . Deposits held with financial institutions may exceed the $250,000 limit. Earnings (Loss) per Share Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common stock outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method. |
Supporting Financial Informat20
Supporting Financial Information (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Accounts Receivable | Accounts receivable (in thousands) March 31, September 30, Ref 2017 2016 Billed receivables $ 7,459 $ 5,265 Unbilled receivables 1,412 1,372 Total accounts receivable 8,871 6,637 Less: Allowance for doubtful accounts (a) — — Accounts receivable, net $ 8,871 $ 6,637 Ref (a): Accounts receivable are non-interest bearing, unsecured and carried at fair value, which is net of an allowance for doubtful accounts. We evaluate our receivables on a quarterly basis and determine whether an allowance is appropriate based on specific collection issues. Our allowance for doubtful accounts was zero at both March 31, 2017 and September 30, 2016 . |
Schedule of Other Current Assets | Other current assets (in thousands) March 31, September 30, Ref 2017 2016 Prepaid insurance and benefits $ 332 $ 168 Total other prepaid expenses 425 374 Other current assets $ 757 $ 542 |
Equipment and Improvemnts, Net | Equipment and improvements, net (in thousands) March 31, September 30, Ref 2017 2016 Furniture and equipment $ 670 $ 638 Computer equipment 330 202 Computer software (a) 800 309 Leasehold improvements 38 38 Total fixed assets 1,838 1,187 Less accumulated depreciation and amortization (718 ) (543 ) Equipment and improvements, net (b) $ 1,120 $ 644 Ref (a): The Company is in the process of configuring a new Enterprise Resource Planning system. Capitalized costs include software licenses and implementation labor related to application development. Since the asset has not been placed in service, no depreciation related to the asset has been recognized. Prior to the asset being placed in service a useful life will be determined. Ref (b): Equipment and improvements are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives ( 3 to 7 ) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are expensed as incurred. |
Schedule of Intangible Assets and Goodwill | Goodwill and Intangibles (in thousands) Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Gross Balance at September 30, 2016 $ 34,745 $ 7,247 $ 1,370 $ — $ 43,362 Measurement period adjustment (b) (8,756 ) 9,379 (890 ) 517 250 Adjusted Gross Balance at March 31, 2017 $ 25,989 $ 16,626 $ 480 $ 517 $ 43,612 (in thousands) Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Gross Balance at September 30, 2016 $ 34,745 $ 7,247 $ 1,370 $ — $ 43,362 Measurement period adjustment (b) (8,756 ) 9,379 (890 ) 517 250 Adjusted Gross Balance at March 31, 2017 $ 25,989 $ 16,626 $ 480 $ 517 $ 43,612 (in thousands) Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Accumulated amortization at September 30, 2016 $ — $ (993 ) $ (65 ) $ — $ (1,058 ) Prior period amortization adjustment (b) — 300 45 (21 ) 324 Current period amortization — (830 ) (24 ) (27 ) (881 ) Total amortization — (1,523 ) (44 ) (48 ) (1,615 ) Net balance at March 31, 2017 (c) $ 25,989 $ 15,103 $ 436 $ 469 $ 41,997 Ref (a): Intangible assets subject to amortization. Ref (b): See Note 11 for discussion on measurement and amortization period adjustments Ref (c): Estimated amortization expense for future years: (in thousands) Year 1 $ 1,762 Year 2 1,762 Year 3 1,762 Year 4 1,762 Year 5 1,762 Thereafter 7,198 $ 16,008 Ref (a): Intangibles acquired during the acquisition of Danya included customer relationships, a covenant not to compete, and a trade name. The intangibles are amortized on a straight-line basis over the estimated useful lives ( 10 years ). Net amount of amortization expense for the quarter ended March 31, 2017 was $.4 million . The amortization for the six months ended March 31, 2017 was $.6 million . |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Ref (c): Estimated amortization expense for future years: (in thousands) Year 1 $ 1,762 Year 2 1,762 Year 3 1,762 Year 4 1,762 Year 5 1,762 Thereafter 7,198 $ 16,008 Ref (a): Intangibles acquired during the acquisition of Danya included customer relationships, a covenant not to compete, and a trade name. The intangibles are amortized on a straight-line basis over the estimated useful lives ( 10 years ). Net amount of amortization expense for the quarter ended March 31, 2017 was $.4 million . |
Accounts Payable, Accrued Expenses, and Other Current Liabilities | ccrued expenses and other current liabilities (in thousands) March 31, September 30, Ref 2017 2016 Accounts payable $ 5,714 $ 4,324 Accrued benefits 1,194 1,197 Accrued bonus and incentive compensation 173 508 Accrued workers compensation insurance 1,035 981 Other accrued expenses 595 126 Accounts payable, accrued expenses, and other current liabilities $ 8,711 $ 7,136 |
Long-term Debt Instruments | Debt obligations (in thousands) March 31, September 30, Ref 2017 2016 Gross bank debt obligations (a) 21,563 23,438 Less unamortized debt issuance costs (1,095 ) (1,222 ) Net bank debt obligation 20,468 22,216 Less current portion of bank debt obligations (3,580 ) (3,560 ) Long term portion of bank debt obligation $ 16,888 $ 18,656 Ref (a): Maturity of the bank debt is as follows: Year 1 $ 3,750 Year 2 3,750 Year 3 3,750 Year 4 3,750 Year 5 6,563 Total net bank debt obligation $ 21,563 |
Other Income (Expense) | Other Income (Expense) (in thousands) (in thousands) Three Months Ended Six Months Ended March 31, March 31, Ref 2017 2016 2017 2016 Interest (expense), net (a) $ (215 ) $ — $ (440 ) $ — Amortization of deferred financing costs (b) (67 ) — (127 ) — Change in fair value of derivative financial instruments 27 — (52 ) Other income (expense), net (127 ) — (702 ) Other income (expense), net $ (255 ) $ (127 ) $ (619 ) $ (702 ) Ref (a): Interest expense on borrowing related to acquisition of Danya Ref (b): Amortizations of expenses related to securing financing to acquire Danya |
Credit Facilities (Tables)
Credit Facilities (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Credit Facilities | A summary of our loan facilities and subordinated debt financing as of March 31, 2017 is as follows: ($ in Millions) As of March 31, 2017 Lender Arrangement Loan Balance Interest Maturity Date Fifth Third Bank Secured term loan $25 million ceiling (a) $ 21.6 LIBOR* + 3.0% 05/01/21 Fifth Third Bank Secured revolving line of credit $10 million ceiling (b) $ — LIBOR* + 3.0% 05/01/18 * LIBOR rate as of March 31, 2017 was 1.15% (a) Represents the principal amounts payable on our Term Loan with Fifth Third Bank that partially funded our acquisition of Danya on May 3, 2016. The $25.0 million term loan from Fifth Third Bank was funded at closing and is secured by liens on substantially all of the assets of the Company. The principal of the Term Loan is payable in fifty-nine consecutive monthly installments of $312,500 beginning on June 1, 2016 with the remaining balance due on May 1, 2021. The Term Loan agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. We are in compliance with all loan covenants and restrictions. Among other matters, we must comply with limitations on: granting liens; incurring other indebtedness; maintenance of assets; investments in other entities and extensions of credit; mergers and consolidations; and changes in nature of business. The loan agreement also requires us to comply with certain financial covenants including: (i) a minimum fixed charge coverage ratio of at least 1.35 to 1.0 commencing with the quarter ending June 30, 2016, and for all subsequent periods, and (ii) a Funded Indebtedness to Adjusted EBITDA ratio not exceeding the ratio of 2.99 to 1.0 at closing and thereafter a ratio ranging from 3.5 to 1.0 for the period through September 30, 2016 to 2.5 to 1.0 for the period ending September 30, 2018. In addition to monthly payments of the outstanding indebtedness, the loan agreement also requires prepayments of a percentage of excess cash flow, as defined in the loan agreement. Accordingly, a portion of our cash flow from operations will be dedicated to the repayment of our indebtedness. (b) The secured revolving line of credit from Fifth Third Bank has a ceiling of up to $10.0 million , of which $5.0 million was drawn at closing to cover partial financing of the Danya purchase. Borrowing on the line of credit is secured by liens on substantially all of the assets of the Company. At December 31, 2016, DLH had repaid all draws on our revolving line of credit with no remaining balance. The Company's total borrowing availability, based on eligible accounts receivables at March 31, 2017 , was $6.3 million . This capacity was comprised of $0.9 million in a stand-by letter of credit and unused borrowing capacity of $5.4 million . The revolving line of credit is subject to loan covenants as described above in the Term Loan, and DLH is fully compliant with those covenants. Management believes that: (a) cash and cash equivalents of approximately $3.1 million as of March 31, 2017 ; (b) the amount available under its line of credit that was in effect at March 31, 2017 ; and (c) planned operating cash flow should be sufficient to support the Company's operations for twelve months from the date of these financial statements. |
Stock-based Compensation, Equit
Stock-based Compensation, Equity Grants, and Warrants (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation Expense | Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our statement of operations: (in thousands) (in thousands) Three Months Ended Six Months Ended Ref March 31, March 31, 2017 2016 2017 2016 DLH employees $ 56 $ 6 $ 63 $ 14 Non-employee directors (a) 8 4 486 328 Total stock option expense $ 64 $ 10 $ 549 $ 342 Ref (a): Equity grants of restricted stock, in accordance with DLH compensation policy for non-employee directors. The shares granted in the first quarters of fiscal years 2016 and 2015 vested immediately, and stock expense of approximately $456 thousand and $304 thousand , respectively were recognized accordingly. Unrecognized stock-based compensation expense (in thousands) Six Months Ended March 31, Ref 2017 2016 Unrecognized expense for DLH employees (a) $ 404 $ 30 Unrecognized expense for non-employee directors (b) 8 71 Total unrecognized expense $ 412 $ 101 Ref (a): Compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. Ref (b): Unrecognized stock expense related to prior years equity grants of restricted stock to non-employee directors, based on performance criteria, in accordance with DLH compensation policy for non-employee directors. The shares will vest and expense will be recorded upon future satisfaction of specified performance. |
Stock Option Activity | The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock. (in years) Weighted Weighted Average (in thousands) (in thousands) Average Remaining Aggregate Number of Exercise Contractual Intrinsic Ref Shares Price Term Value Options outstanding, September 30, 2016 2,226 $1.43 5.8 $ 7,581 Canceled — Granted (a) 400 $5.94 Exercised (10 ) $3.00 Options outstanding, March 31, 2017 2,616 $3.48 6.6 $ 9,121 |
Stock Option Shares Outstanding, Vested and Expected to Vest | Stock options shares outstanding, vested and unvested for the period ended Number of Shares (in thousands) March 31, September 30, Ref 2017 2016 Vested and exercisable 1,949 1,909 Unvested (a) 667 317 Options outstanding 2,616 2,226 Ref (a): Certain awards vest upon satisfaction of certain performance criteria. |
Fair Value of Financial Instr23
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Liabilities Measured on Recurring Basis | The Company has issued warrants to purchase stock as described above. The fair value of the warrants was estimated by management in the absence of a readily ascertainable market value as follows: December 31, 2016 Level 1 Level 2 Level 3 Warrant issued to acquire common stock $ — $ — $ 283 March 31, 2017 Level 1 Level 2 Level 3 Warrant issued to acquire common stock $ 0 $ 0 $ 256 |
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques | Assumptions used in valuing the warrants as of March 31, 2017 included: Risk free interest rate 1.68 % Contractual term 5 years Dividend yield — % Expected lives 4.1 years Expected volatility 144 % Fair value per warrant $5.29 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | Change in Level 3 liabilities for the year ended March 31, 2017: Beginning Balance Realized/Unrealized Purchases and Ending Balance Change in Realized (gains) losses for liabilities held at September 30, 2016 (Gains) Losses Settlements March 31, 2017 March 31, 2017 Warrant issued to acquire common stock $ 204 $ 52 $ — $ 256 $ 52 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Diluted earnings per share | Diluted earnings per share is calculated using the treasury stock method. (in thousands) Three Months Ended Six Months Ended March 31, March 31, 2017 2016 2017 2016 Numerator: Net income $ 979 $ 337 $ 1,303 $ 221 Denominator: Denominator for basic net income (loss) per share - weighted-average outstanding shares 11,249 9,717 11,225 9,642 Effect of dilutive securities: Stock options and restricted stock 1,496 949 1,488 898 Denominator for diluted net income per share - weighted-average outstanding shares 12,745 10,666 12,713 10,540 Net income per share - basic $ 0.09 $ 0.04 $ 0.12 $ 0.02 Net income per share - diluted $ 0.08 $ 0.03 $ 0.10 $ 0.02 |
Commitment and Contingencies (T
Commitment and Contingencies (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual Obligation, Fiscal Year Maturity Schedule | Payments Due By Period Obligations Next 12 2-3 4-5 More than 5 (Amounts in thousands) Ref Total Months Years Years Years Debt Obligations (a) $ 21,563 $ 3,750 $ 7,500 $ 10,313 Facility leases (b) $ 4,122 $ 900 $ 1,819 $ 694 $ 709 Equipment capital leases (c) 24 24 — — — Equipment operating leases (d) 459 102 204 153 — Total Obligations $ 26,168 $ 4,776 $ 9,523 $ 11,160 $ 709 Ref (a): Amounts due under term loan agreement described in Note 5. Ref (b):Represents amounts committed on facility lease agreements as of March 31, 2017 . Ref (c): Represents remaining amounts committed as of March 31, 2017 on a capital lease arrangement. Ref (d): Represents remaining amounts committed as of March 31, 2017 on operating lease arrangements.. |
Business Combinations (Tables)
Business Combinations (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition | e allocated total acquisition consideration and the finalized allocation of fair value to the related assets and liabilities as follows: (Amounts in thousands) Cash $ 36,720 Common stock, fair value 2,500 Total Consideration $ 39,220 (Amounts in thousands) Net assets acquired Cash and cash equivalents $ 4,009 Accounts receivable 5,712 Other current assets 444 Total current assets 10,165 Accounts payable and accrued expenses (5,013 ) Payroll liabilities (1,432 ) Net working capital surplus 3,720 Property and equipment, net 403 Intangible assets: Customer relationships 16,626 Covenant not to compete 480 Trade name 517 Other long term assets 81 Net identifiable assets acquired 18,107 Goodwill 17,393 Net assets acquired $ 39,220 |
Business Acquisition, Pro Forma Information | The pro forma results presented below include amortization charges for acquired intangible assets and adjustments to interest expense incurred and exclude related acquisition expenses. (in thousands) (in thousands) Three Months Ended Six Months Ended March 31, March 31, Pro forma results 2017 2016 2017 2016 Revenue $ 29,905 $ 28,987 $ 56,016 $ 57,495 Net income $ 979 $ 821 $ 1,303 $ 426 Number of shares outstanding - basic 11,249 11,098 11,225 11,023 Number of shares outstanding - diluted 12,745 12,047 12,713 11,921 Basic earnings per share $ 0.09 $0.07 $0.12 $0.04 Diluted earnings per share $ 0.08 $0.07 $0.10 $0.04 |
Business Overview (Details)
Business Overview (Details) | 6 Months Ended | |
Mar. 31, 2017employeelocation | Mar. 31, 2016 | |
Concentration Risk [Line Items] | ||
Number of employees (employee) | employee | 1,400 | |
Minimum number of locations in which entity operates (location) | location | 30 | |
US Government [Member] | Revenue concentration | Customer concentration | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage (percent) | 100.00% | |
Human Services and Solutions [Member] | Revenue concentration | Customer concentration | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage (percent) | 30.00% | |
Department of Veterans Affairs [Member] | Revenue concentration | Customer concentration | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage (percent) | 58.00% | 95.00% |
Supporting Financial Informat28
Supporting Financial Information - Accounts Receivable (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 8,871 | $ 6,637 |
Less: Allowance for doubtful accounts | 0 | 0 |
Accounts Receivable, Net | 8,871 | 6,637 |
Billed Receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | 7,459 | 5,265 |
Unbilled Receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Total accounts receivable | $ 1,412 | $ 1,372 |
Supporting Financial Informat29
Supporting Financial Information - Other Current Assets (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Document Fiscal Year Focus | 2,017 | |
Prepaid insurance and benefits | $ 332 | $ 168 |
Total other prepaid expenses | 425 | 374 |
Other current assets | $ 757 | $ 542 |
Supporting Financial Informat30
Supporting Financial Information - Equipment and Improvements, net (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Property, Plant and Equipment [Line Items] | ||
Document Fiscal Year Focus | 2,017 | |
Furniture and equipment | $ 670 | $ 638 |
Computer equipment | 330 | 202 |
Computer software | 800 | 309 |
Leasehold improvements | 38 | 38 |
Property, Plant and Equipment, Gross | 1,838 | 1,187 |
Less accumulated depreciation and amortization | (718) | (543) |
Equipment and improvements, net | $ 1,120 | $ 644 |
Minimum | Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, Plant and Equipment, Useful Life | 3 years | |
Maximum | Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, Plant and Equipment, Useful Life | 7 years |
Supporting Financial Informat31
Supporting Financial Information - Goodwill and Intangible Asset Adjustment (Details) $ in Thousands | 6 Months Ended |
Mar. 31, 2017USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, Gross Period Start | $ 34,745 |
Goodwill, Measurement Period Adjustment | (8,756) |
Goodwill, Gross Period End | 25,989 |
Goodwill and Finite Lived Intangible Assets Total [Roll Forward] | |
Goodwill and Finite-Lived Intangible Assets, Gross Period Start | 43,362 |
Goodwill Purchase Accounting Adjustment and Finite-Lived Intangible Asset Measurement Period Adjustment | 250 |
Goodwill and Finite-Lived Intangible Assets, Gross Period End | 43,612 |
Customer Relationships [Member] | |
Indefinite-lived Intangible Assets [Roll Forward] | |
Finite-Lived Intangible Assets, Gross, Period Start | 7,247 |
Finite-Lived Intangible Assets, Measurement Period Adjustment | 9,379 |
Finite-Lived Intangible Assets, Gross, Period End | 16,626 |
Noncompete Agreements [Member] | |
Indefinite-lived Intangible Assets [Roll Forward] | |
Finite-Lived Intangible Assets, Gross, Period Start | 1,370 |
Finite-Lived Intangible Assets, Measurement Period Adjustment | (890) |
Finite-Lived Intangible Assets, Gross, Period End | 480 |
Trade Names [Member] | |
Indefinite-lived Intangible Assets [Roll Forward] | |
Finite-Lived Intangible Assets, Gross, Period Start | 0 |
Finite-Lived Intangible Assets, Measurement Period Adjustment | 517 |
Finite-Lived Intangible Assets, Gross, Period End | $ 517 |
Supporting Financial Informat32
Supporting Financial Information - Goodwill (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | |
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Accumulated Amortization | $ (1,615) | $ (1,058) | |
Goodwill, Gross | 0 | ||
Intangible Assets, Gross (Excluding Goodwill) | 324 | ||
Amortization of Intangible Assets | (881) | ||
Goodwill | 25,989 | $ 35,000 | |
Finite-Lived Intangible Assets, Net | 16,008 | ||
Goodwill and other intangible assets, net | 41,997 | 42,304 | |
Customer Relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Accumulated Amortization | (1,523) | (993) | |
Finite-Lived Intangible Assets, Gross | 300 | ||
Amortization of Intangible Assets | (830) | ||
Finite-Lived Intangible Assets, Net | 15,103 | ||
Noncompete Agreements [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Accumulated Amortization | (44) | (65) | |
Finite-Lived Intangible Assets, Gross | 45 | ||
Amortization of Intangible Assets | (24) | ||
Finite-Lived Intangible Assets, Net | 436 | ||
Trade Names [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Accumulated Amortization | (48) | 0 | |
Finite-Lived Intangible Assets, Gross | $ (21) | ||
Amortization of Intangible Assets | (27) | ||
Finite-Lived Intangible Assets, Net | $ 469 |
Supporting Financial Informat33
Supporting Financial Information - Intangible Assets Amortization Expense (Details) $ in Thousands | 3 Months Ended | 6 Months Ended |
Mar. 31, 2017USD ($) | Mar. 31, 2017USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Finite-Lived Intangible Asset, Useful Life | 10 years | |
Year 1 | $ 1,762 | $ 1,762 |
Year 2 | 1,762 | 1,762 |
Year 3 | 1,762 | 1,762 |
Year 4 | 1,762 | 1,762 |
Year 5 | 1,762 | 1,762 |
Thereafter | 7,198 | 7,198 |
Finite-Lived Intangible Assets, Net | 16,008 | 16,008 |
Amortization of Intangible Assets | $ 400 | $ 600 |
Supporting Financial Informat34
Supporting Financial Information - Accounts Payable, Accrued Expense and Other Current Liabilities (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Document Fiscal Year Focus | 2,017 | |
Accounts payable | $ 5,714 | $ 4,324 |
Accrued benefits | 1,194 | 1,197 |
Accrued bonus and incentive compensation | 173 | 508 |
Accrued workers compensation insurance | 1,035 | 981 |
Other accrued expenses | 595 | 126 |
Total accrued expenses and other current liabilities | $ 8,711 | $ 7,136 |
Supporting Financial Informat35
Supporting Financial Information - Long-term Debt (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Debt Instrument [Line Items] | ||
Document Fiscal Year Focus | 2,017 | |
Long-term Debt | $ 21,563 | |
Long-term Debt, Excluding Current Maturities | 17,096 | |
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months | 3,750 | |
Notes Payable to Banks [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Gross | 21,563 | $ 23,438 |
Unamortized Debt Issuance Expense | 1,095 | 1,222 |
Long-term Debt | 20,468 | 22,216 |
Long-term Debt, Current Maturities | (3,580) | (3,560) |
Long-term Debt, Excluding Current Maturities | 16,888 | $ 18,656 |
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months | 3,750 | |
Long-term Debt, Maturities, Repayments of Principal in Year Two | 3,750 | |
Long-term Debt, Maturities, Repayments of Principal in Year Three | 3,750 | |
Long-term Debt, Maturities, Repayments of Principal in Year Four | 3,750 | |
Long-term Debt, Maturities, Repayments of Principal in Year Five | $ 6,563 |
Supporting Financial Informat36
Supporting Financial Information - Other Income (Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Document Fiscal Year Focus | 2,017 | ||||
Interest income (expense), net | $ (215) | $ 0 | $ (440) | $ 0 | |
Amortization of deferred financing costs | (67) | 0 | (127) | $ 0 | 0 |
Increase (Decrease) in Derivative Assets and Liabilities | 27 | 0 | (52) | ||
Other income (expense), net | (127) | 0 | $ (702) | ||
Other income (expense) net | $ (255) | $ (127) | $ (619) | $ (702) |
Credit Facilities (Details)
Credit Facilities (Details) | May 03, 2016USD ($) | Mar. 31, 2017USD ($) | Sep. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Sep. 30, 2015USD ($) |
Line of Credit Facility [Line Items] | |||||
Ratio of Debt to Earnings Before Interest, Taxes, Depreciations, and Amortization, Period Two | 3.5 | ||||
Ratio of Debt to Earnings Before Interest, Taxes, Depreciations, and Amortization, Period Three | 2.5 | ||||
Fixed Charge Coverage Ratio | 1.35 | ||||
Ratio of Debt to Earnings Before Interest, Taxes, Depreciations, and Amortization | 2.99 | ||||
Line of Credit Facility, Current Borrowing Capacity | $ 6,300,000 | ||||
Cash and cash equivalents | 3,091,000 | $ 3,427,000 | $ 6,934,000 | $ 5,558,000 | |
Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Maximum availability | 25,000,000 | ||||
Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Maximum availability | 10,000,000 | ||||
Loan Balance | 5,000,000 | ||||
Debt Instrument, Unused Borrowing Capacity, Amount | 5,400,000 | ||||
Letter of Credit [Member] | |||||
Line of Credit Facility [Line Items] | |||||
Line of Credit Facility, Current Borrowing Capacity | $ 900,000 | ||||
Term Loan with Fifth Third Bank [Member] | Term Loans | |||||
Line of Credit Facility [Line Items] | |||||
Maximum availability | $ 25,000,000 | ||||
Line of Credit Facility, Periodic Payment, Principal | $ 312,500 |
Credit Facilities - Schedule of
Credit Facilities - Schedule of Credit Facilities (Details) | May 03, 2016 | Mar. 31, 2017USD ($) |
Line of Credit Facility [Line Items] | ||
Ratio of Debt to Earnings Before Interest, Taxes, Depreciations, and Amortization | 2.99 | |
Loan Balance | $ 21,563,000 | |
London Interbank Offered Rate (LIBOR) [Member] | ||
Line of Credit Facility [Line Items] | ||
Interest rate (percent) | 1.00% | |
Term Loans | ||
Line of Credit Facility [Line Items] | ||
Maximum availability | $ 25,000,000 | |
Term Loans | London Interbank Offered Rate (LIBOR) [Member] | ||
Line of Credit Facility [Line Items] | ||
Basis spread on loan | 3.00% | |
Line of Credit | ||
Line of Credit Facility [Line Items] | ||
Loan Balance | $ 0 | |
Maximum availability | $ 10,000,000 | |
Line of Credit | London Interbank Offered Rate (LIBOR) [Member] | ||
Line of Credit Facility [Line Items] | ||
Basis spread on loan | 3.00% |
Significant Accounting Polici39
Significant Accounting Policies - Goodwill, Income Taxes, and Cash and Cash Equivalents (Details) - USD ($) | 6 Months Ended | ||
Mar. 31, 2017 | Sep. 30, 2016 | Sep. 30, 2015 | |
Accounting Policies [Abstract] | |||
Amortization of Intangible Assets | $ 881,000 | ||
Goodwill and other intangible assets, net | $ 25,989,000 | $ 35,000,000 | |
Cash, FDIC Insured Amount | $ 250,000 |
Stock-based Compensation, Equ40
Stock-based Compensation, Equity Grants, and Warrants - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands, shares in Millions | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Document Fiscal Year Focus | 2,017 | ||||
Total compensation expense | $ 64 | $ 10 | $ 549 | $ 342 | |
Unrecognized stock-based compensation expense | 412 | 101 | 412 | 101 | |
DLH Employees | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Unrecognized stock-based compensation expense | 404 | 30 | 404 | 30 | |
Non-employee Directors | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Unrecognized stock-based compensation expense | 8 | 71 | 8 | 71 | |
Selling, General and Administrative Expenses | DLH Employees | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Total compensation expense | 56 | 6 | 63 | 14 | |
Selling, General and Administrative Expenses | Non-employee Directors | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Total compensation expense | $ 8 | $ 4 | 486 | 328 | |
Restricted Stock [Member] | Non-employee Directors | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Total compensation expense | $ 456 | $ 304 | |||
Long Term Incentive Plan 2006 | Employee Stock Option | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Number of shares available for grant | 0.5 | ||||
Expiration term | 10 years |
Stock-based Compensation, Equ41
Stock-based Compensation, Equity Grants, and Warrants - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Sep. 30, 2016 | |
Number of Shares | ||
Outstanding at the beginning of the period (in shares) | 2,226 | |
Granted (in shares) | 400 | |
Cancelled (in shares) | (10) | |
Outstanding at the end of the period (in shares) | 2,616 | 2,226 |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 1.43 | |
Outstanding at the end of the period (in dollars per share) | $ 3.48 | $ 1.43 |
Weighted Average Remaining Contractual Term | ||
Weighted Average Remaining Contractual Term | 6 years 7 months 6 days | 5 years 9 months 18 days |
Aggregate Intrinsic Value | ||
Outstanding at the beginning of the period (in dollars) | $ 7,581 | |
Outstanding at the end of the period (in dollars) | $ 9,121 | $ 7,581 |
Stock-based Compensation, Equ42
Stock-based Compensation, Equity Grants, and Warrants - Stock Options Outstanding, Vested and Unvested (Details) - shares shares in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Document Fiscal Year Focus | 2,017 | |
Vested and exercisable | 1,949 | 1,909 |
Unvested | 667 | 317 |
Option outstanding | 2,616 | 2,226 |
Fair Value of Financial Instr43
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Debt Instrument [Line Items] | ||
Derivative Liability, Current | $ 256 | $ 204 |
Wynnefiled Capital, Bank Term Loan | ||
Debt Instrument [Line Items] | ||
Class of Warrant or Right, Outstanding | 53,619 |
Fair Value of Financial Instr44
Fair Value of Financial Instruments - Fair Value Assumptions (Details) - $ / shares | 6 Months Ended | |
Mar. 31, 2017 | Jun. 30, 2016 | |
Fair Value Disclosures [Abstract] | ||
Fair Value Assumptions, Risk Free Interest Rate | 1.68% | |
Fair Value Assumptions, Expected Term | 5 years | |
Fair Value Assumptions, Expected Dividend Rate | 0.00% | |
Fair Value Assumptions, Expected Lives | 4 years 1 month 6 days | |
Fair Value Assumptions, Weighted Average Volatility Rate | 144.00% | |
Fair Value Assumptions, Exercise Price | $ 5.29 |
Fair Value of Financial Instr45
Fair Value of Financial Instruments (Schedule of Fair Value of Warrants) (Details) - Fair Value, Measurements, Recurring [Member] $ in Thousands | Mar. 31, 2017USD ($) |
Fair Value, Inputs, Level 1 [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Derivative Liability | $ 0 |
Fair Value, Inputs, Level 2 [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Derivative Liability | 0 |
Fair Value, Inputs, Level 3 [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Derivative Liability | $ 256 |
Fair Value of Financial Instr46
Fair Value of Financial Instruments (Change in Level 3) (Details) - Warrant [Member] - USD ($) $ in Thousands | 6 Months Ended | |
Mar. 31, 2017 | Sep. 30, 2016 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value | $ 256 | $ 204 |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Earnings | 52 | |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Purchases, (Sales), Issuances, (Settlements) | 0 | |
Fair Value, Liabilities Measured on Recurring Basis, Change in Unrealized Gain (Loss) | $ 52 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Earnings Per Share [Abstract] | ||||
Document Fiscal Year Focus | 2,017 | |||
Numerator [Abstract] | ||||
Net income (loss) | $ 979 | $ 337 | $ 1,303 | $ 221 |
Denominator [Abstract] | ||||
Denominator for basic net income (loss) per share - weighted-average outstanding shares (shares) | 11,249 | 9,717 | 11,225 | 9,642 |
Effect of dilutive securities: | ||||
Stock options and restricted stock (shares) | 1,496 | 949 | 1,488 | 898 |
Denominator for diluted net income (loss) per share - weighted-average outstanding shares (shares) | 12,745 | 10,666 | 12,713 | 10,540 |
Net income (loss) per share - basic (dollars per share) | $ 0.09 | $ 0.04 | $ 0.12 | $ 0.02 |
Net income (loss) per share - diluted (in dollars per share) | $ 0.08 | $ 0.03 | $ 0.10 | $ 0.02 |
Commitment and Contingencies (D
Commitment and Contingencies (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Operating Leased Assets [Line Items] | |
Loan Balance | $ 21,563 |
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months | 3,750 |
Long-term Debt, Maturing in Years Two and Three | 7,500 |
Long-term Debt, Maturing in Years Four and Five | 10,313 |
Contractual Obligation | 26,168 |
Contractual Obligation, Less than 1 Year | 4,776 |
Contractual Obligation, 1-3 Years | 9,523 |
Contractual Obligation, 4-5 years | 11,160 |
Contractual Obligation, after 5 years | 709 |
Facility Leases [Member] | |
Operating Leased Assets [Line Items] | |
Operating Leases, Future Minimum Payments Due | 4,122 |
Operating Leases, Less than 1 Year | 900 |
Operating Leases, 1-3 Years | 1,819 |
Operating Leases, 4-5 years | 694 |
Operating Leases, after 5 years | 709 |
Equipment Leases [Member] | |
Operating Leased Assets [Line Items] | |
Operating Leases, Future Minimum Payments Due | 459 |
Operating Leases, Less than 1 Year | 102 |
Operating Leases, 1-3 Years | 204 |
Operating Leases, 4-5 years | 153 |
Contractual Obligation | 24 |
Contractual Obligation, Less than 1 Year | 24 |
Contractual Obligation, 1-3 Years | $ 0 |
Commitment and Contingencies -
Commitment and Contingencies - Additional Information (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Commitments and Contingencies Disclosure [Abstract] | ||
Accrued workers compensation insurance | $ 1,035 | $ 981 |
Business Combinations (Details)
Business Combinations (Details) - USD ($) $ / shares in Units, $ in Thousands | May 03, 2016 | Mar. 31, 2017 | Mar. 31, 2017 |
Business Acquisition [Line Items] | |||
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual | $ 20,500 | ||
Business Acquisition, Pro Forma Income (Loss) from Continuing Operations, Net of Tax | $ 1,200 | ||
Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Business Combination, Consideration Transferred, Net of Debt Issuance Cost | $ 38,750 | ||
Business Combination, Consideration Transfered, Working Capital Adjustment | $ 470 | ||
Consideration transferred | $ 36,720 | ||
Noncash or Part Noncash Acquisition, Noncash Financial or Equity Instrument Consideration, Shares Issued | 670,242 | ||
Equity consideration transfered | $ 2,500 | ||
Business Acquisition, Share Price | $ 3.73 | ||
Minority interest ownership percentage | 6.00% | ||
Business Combinations, Contingent Consideration, Payments | 250 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Increase in Indefinite-Lived Intangible Assets | 9,000 | ||
Goodwill, Period Increase (Decrease) | 9,500 | ||
Business Combination, Contingent Consideration, Decrease to Amortization | $ 300 | ||
Cash | $ 3,750 | ||
Subordinated Debt | Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Debt Instrument, Face Amount | 2,500 | ||
Line of Credit | Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Debt Instrument, Face Amount | $ 30,000 |
Business Combinations - Purchas
Business Combinations - Purchase Price and Allocation of Assets and Liabilities (Details) - USD ($) $ in Thousands | May 03, 2016 | Mar. 31, 2017 | Sep. 30, 2015 |
Business Acquisition [Line Items] | |||
Goodwill and other intangible assets, net | $ 25,989 | $ 35,000 | |
Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Cash | $ 36,720 | ||
Common stock, fair value | 2,500 | ||
Business Combination, Consideration Transfered, Net of Cash Acquired | 39,220 | ||
Cash and cash equivalents | 4,009 | ||
Accounts receivable | 5,712 | ||
Other current assets | 444 | ||
Total current assets | 10,165 | ||
Accounts payable and accrued expenses | (5,013) | ||
Payroll liabilities | (1,432) | ||
Net working capital surplus | 3,720 | ||
Property and equipment, net | 403 | ||
Other long term assets | 81 | ||
Net identifiable assets acquired | 18,107 | ||
Goodwill and other intangible assets, net | 17,393 | ||
Net assets acquired | 39,220 | ||
Customer Relationships [Member] | Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 16,626 | ||
Noncompete Agreements [Member] | Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 480 | ||
Trade Names [Member] | Dayna International, LLC | |||
Business Acquisition [Line Items] | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | $ 517 |
Business Combinations - Pro For
Business Combinations - Pro Forma Results (Details) - Dayna International, LLC - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Business Acquisition [Line Items] | ||||
Revenue | $ 29,905 | $ 28,987 | $ 56,016 | $ 57,495 |
Net income | $ 979 | $ 821 | $ 1,303 | $ 426 |
Number of shares outstanding - basic (in shares) | $ 11,249,000 | $ 11,098,000 | $ 11,225,000 | $ 11,023,000 |
Number of shares outstanding - diluted (in shares) | 12,745,000 | 12,047,000 | 12,713,000 | 11,921,000 |
Basic earnings per share (in dollars per share) | 0.09 | 0.07 | 0.12 | 0.04 |
Diluted earnings per share (in dollars per share) | $ 0.08 | $ 0.07 | $ 0.10 | $ 0.04 |
Related Party Disclosure (Detai
Related Party Disclosure (Details) | 6 Months Ended |
Mar. 31, 2017shares | |
Wynnefiled Capital, Bank Term Loan | |
Related Party Transaction [Line Items] | |
Class of Warrant or Right, Outstanding | 53,619 |